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BUSINESS: This Paragraph From HBR Says Groupon Is Dead (But Trying to Stay Alive)

A lot of you use Groupon and similar discount/coupon services.  If you've never dug into the business model behind the service, you might be surprised to learn that business (mostly small businesses, btw) that use Groupon and similar services don't always fare well as a result of the campaigns they use Groupon to execute.  A study from Harvard Business Review recently caught my eye on the topic.

More from HBR:

"Academic research has consistently found that running a deal using Groupon (or one of its competitors) has two main implications for a business: more customers in the short term but lower favorability ratings. Hence, short-term gains in traffic come at the expense of a lower future traffic and the overall value proposition to the merchant remains unclear."

Translation: Using a Groupon-type service means that business owners can drive traffic, but the customers brought in by campaigns have no loyalty, will trash them on reviews and almost never come back to pay full price on a regular basis.

Think about paying candidates to come interview. Could you do that? Yes.  Would it be innovative? Without a doubt.

Would it end well?  Probably not.  They don't value your company, they value the pay they're receiving.

Groupon customers value the deal, not the product. If they had a long term need for the product, they'll already be loyal customers - of the company in question, or one of its competitors.Implication for the HR world - any thought about paying candidates or employees to do anything that's hard to get them to do otherwise is probably garbage.

Educate yourself up on the whole discounting world of Groupon-like services by clicking here.

Comments

Scottstone9

Great observations and a solid post,KD. One has to wonder is there a "break even" point in which a promotion can in fact draw a customer who has the potential to be brand loyal and willing to pay full price in the future. Most "Groupon / Living Social" offers are such "smokin' deals" that they are destined to draw in customers who are simply chasing the best deal of the day. Will be interesting to see if this approach ever moderates.

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